What is the expected value for the optimum decision alternative?
A)$100,000
B)$60,000
C)$50,000
D)$40,000
E)$20,000

Question

Quizplus · Accepted Answer

The expected value for each alternative is:
Alternative A: (0.4 x $0) + (0.6 x $100,000) = $60,000
Alternative B: (0.3 x $0) + (0.7 x $50,000) = $35,000
Alternative C: (0.5 x $0) + (0.5 x $40,000) = $20,000
Alternative D: (0.2 x $0) + (0.8 x $20,000) = $16,000
Therefore, the optimum decision alternative is alternative A with an expected value of $60,000.

What Is the Expected Value for the Optimum Decision Alternative